Posts from November 2016

Wednesday, November 23, 2016

I hope everyone has a Happy Thanksgiving and that you're all planning to enjoy the long holiday weekend.

As a special Thanksgiving treat for those of us on the plaintiffs' side, take a look at Lubin v. The Wackenhut Corporation, ___ Cal.App.5th ___ (Nov. 21, 2016), handed down on Monday by the Second Appellate District, Division Four.

In Lubin, the trial court initially granted class certification of the meal period, rest break, and wage statement claims, but then decertified the classes after Dukes came down in 2011. Five years later, this opinion holds that the decertification was error on every level, heavily relying on Brinker and a number of post-Brinkeropinions. The opinion also explains in detail why the trial court's reliance on Dukes was misplaced, and that the concerns raised in Dukes are inapplicable outside the context of Title VII cases, which involve unique statutory requirements.

In my 2012 article on Dukes, I cited the Wackenhut decertification order as an example of a misapplication of the Dukes "trial by formula" holding. "Dukes and Common Proof in California Class Actions," 21 Competition 9, 12 & n.26 (Summer 2012). It's very nice to see the Court of Appeal agree in a published opinion.

Congratulations to my good friends Emily Rich and Ted Franklin on their amazing win! I know they both worked incredibly hard on this appeal. You can tell by reading the opinion that the briefing was extremely thorough.

As for the FAL claim, the complaint alleged that the defendant made numerous false statements to the public, but did not allege that the plaintiff saw or relied on them for any reason. Id. at 47. (The plaintiff alleged that she worked for a company who hired the defendant to handle its payroll and wage statements.) The opinion discusses Kwikset at some length. See id. at 47-49.

The portion of the opinion discussing the UCL claim is more interesting. The opinion does not acknowledge the three-way split in authority on the definition of "unfair" conduct. Instead, it holds that the plaintiff failed to state a claim under the post-Cel-Tech "tethering" test, under which, in the words of this opinion, "the public policy necessary to establish an unfair practice must be closely tied to a statute." Slip op. at 50-51. The lack of a statutory tether defeated not only the "unfair" prong claim, but also the "unlawful" prong claim, to the extent predicated on non-statutory, common-law violations (including negligence and breach of contract). Id. at 51-52. (I think the latter holding was error, but it might not matter, because the opinion allows those common-law claims to proceed on their own. That said, it would be unfortunate if this opinion had the effect of eroding the broad scope of the UCL's "unlawful" prong as construed by the Supreme Court.)

As for the "fraudulent" prong claim, this failed for lack of allegations of reliance, and also because the complaint alleged no losses that could be recoverable from the payroll company as restitution. Id. at 52-53. The plaintiff allegedly lost wages because of the payroll company's misconduct, but the company "derived no benefit" from the lost wages. Id. (citing Bradstreet v. Wong, 161 Cal.App.4th 1440, 1444 (2008)). In other words, it's not the payroll company, but rather the employer, who owed the plaintiff any lost wages or penalties, and the payroll company had acquired no money from the plaintiff, either directly or indirectly, by means of its alleged payroll mistakes (or misrepresentations).

Tuesday, November 08, 2016

First of all, I want to encourage everyone to get to the polls today and vote! I certainly will be voting today (Go Hillary!).

When I was reading the Walker opinion for my post yesterday, I realized the Ninth Circuit had handed down an opinion on a similar subject earlier this year (March) that I hadn't covered yet.

In Radcliffe v. Hernandez, 818 F.3d 537 (9th Cir. 2016), the court considered whether the attorneys who had included improper promises concerning incentive awards in a class action settlement agreement, thereby creating a conflict of interest for class counsel between the class representatives and the unnamed class members, should be disqualified from continuing to represent the class. In 2013, the Ninth Circuit had reversed final approval of the settlement because of the incentive award provisions. See Radcliffe v. Experian Information Solutions, Inc., 715 F.3d 1157 (9th Cir. 2013) (briefly discussed in this blog post).

On remand, the objectors who had obtained that reversal moved to disqualify the firms previously appointed as lead counsel, who had negotiated the settlement with the problematic provisions. The district court denied the motion, but certified the questions to the Ninth Circuit, which granted permission to appeal. 818 F.3d at 540-41. The Ninth Circuit affirmed, holding that "California law does not require automatic disqualification in class action cases." Id. at 541.

In so holding, the Court considered a number of California decisions involving conflicts in non-class cases, but concluded that none of these:

fits the circumstances of the lawyer who represents a class of plaintiffs whose interests may in some ways be adverse to each other, but all of whose interests are adverse to the defendant. In a class action, conflicts often arise not because an attorney simultaneously represents litigation adversaries but because they simultaneously represent different members of the same class who develop divergent interests regarding how to prevail on their shared claims. Thus, in Radcliffe I, we explained that the conditional incentive award was improper because it “undermined [the named plaintiffs'] ability to ‘fairly and adequately protect the interests of the class.’ ” Radcliffe I, 715 F.3d at 1165 (quoting Fed. R. Civ. Pro. 23(a)(4)). “This requirement is rooted in due-process concerns—‘absent class members must be afforded adequate representation before entry of a judgment which binds them.’ ” Id. (quoting Hanlon v. Chrysler Corp., 150 F.3d 1011, 1020 (9th Cir. 1998)). These concerns with adequate representation and due process for absent party members are simply not present in individual plaintiff suits. And because the California Supreme Court has never discussed the automatic disqualification rule in the context of class actions, it also has never been required to confront the ethical issues and conflicts of interest that are unique to class action cases. Given this vacuum, we are not willing to assume that California courts would apply the same disqualification rules to a class action case as they do in individual plaintiff cases.

Id. at 544-45. In particular, given the specific type of conflict that the settlement agreement created, disqualification was not warranted:

[I]n this case the district court could reasonably conclude that the conflict of interest was appropriately cured when we rejected the settlement agreement that contained the improper conditional incentive award. This conflict was not inherent to the relationship between Hernandez Counsel [i.e., class counsel] and the rest of the class but rather, as in Rodriguez, resulted from a particular provision in an agreement that was later held invalid.

Id. at 546. The opinion goes on to hold that class counsel remained adequate to represent the class and should not be replaced by objectors' counsel. Id. at 547-49.

The opinion concludes:

We previously found that Hernandez Counsel created a significant conflict of interest between themselves, their clients, and the rest of the class, and nothing in the present order diminishes or qualifies that holding. We are not convinced, however, that the conflict we found requires automatic disqualification of class counsel. We believe that, given the unique ethical and due process concerns involved in class actions, district courts must have the discretion to address attorney representation and disqualification issues based on the details of each case, and we further believe the California Supreme Court would agree. Accordingly, we hold that the district court did not abuse its discretion in denying White Counsel's motion to disqualify Hernandez Counsel and to be appointed as class counsel, and granting Hernandez Counsel's cross-motion to be appointed as class counsel.

The law firm represented a certified class in one case against Apple, and the putative class in a second, later-filed case against Apple. Apple moved to disqualify the firm in the second case on the ground that a store manager, who was an unnamed member of the certified class in the first case, would be a critical adverse witness in the second case. Slip op. at 3-6. The trial court granted the motion, and the Court of Appeal affirmed. It reasoned, first of all, that the order granting class certification in the first case rendered this particular unnamed class member (but not necessarily all unnamed class members) the firm's client for conflicts purposes. Id. at 10-15.

Then, the Court concluded that Apple's evidence supported the trial court's holding that in order to advance the class claims in the second case, the firm would have to cross-examine this unnamed class member in a manner that would conflict with her "employment interests." Id. at 15-20. This part of the analysis was highly dependent on the particular facts of the second class case, including the specific arguments to be presented by both sides on liability. Given those facts, automatic disqualification was warranted. Id. at 22-24.

The opinion recognizes that not all unnamed class members automatically become the firm's clients for conflicts purposes (as opposed to other purposes, such as the rule of ethics prohibiting opposing counsel from communicating with represented parties, and the attorney-client privilege). See id. at 10-11. The conclusion that the specific unnamed class member/witness should be considered a firm client for conflicts purposes turned on the fact that the two cases were factually related as well as "additional undisputed evidence regarding [the class member's] identity and likely role in this case." Id. at 11.